THE OBJECT CLAUSE: THE POWER BASE OF CORPORATE ENTITIES IN NIGERIA
Dating back to the oil boom period, one recalls on the sudden and amazing expansion of our domestic markets with high demands for various products. Particularly immediately after the civil war, Nigeria economy has provided an investment climate in the country.The need to pull resources together became an impetus among Nigerians. As a result, many companies have been formed and the existing ones expanded. Thus many Nigeria business have come to appreciate investment in stock and shareAs regards the above development the Nigeria government started passing legislation to assist Nigeria businessmen in forming limited liability companies. The first of such legislation was the companies Act 1968, and indigenisation Decree 1972 amended 1989 which were all aimed at assisting Nigerians to own or have controlling shares in companies thereby meeting their aspirations. Currently, the privatization and commercialization of public companies across the country makes the existing laws inadequate. This is the reason behind why the federal government has gone further in promulgating the companies and Allied matter Decree No.1 of 1990.This decree serves as the main instrument which regulates the formation and control of companies in the country today.However, in the course of this project work much reference has been made of the companies Decree 1990. at the earlier stage of this write-up, the word “company” was described, its from of existence and the basic documents of the company was described.
The project work has also dealt with the consequence of incorporate entities in Nigeria, viz- a –viz-ultra – vires doctrine. This being the crux of the project work, the writer tried to include various statutory provision especially section 39 (1) CAMD 1990 and judicial authorities as a testimony on how the object clause is the substrata of corporate entities in Nigeria.However, the project work has been designed mainly in fulfillment for award of the Higher National Diploma in Accounting, it is therefore the hope of the researcher that work would be useful to all and sundry.
TABLE OF CONTENT
1.1 Statement of study
1.2 Purpose of study
1.3 Significance of study
1.4 Statement of Hypotheses
1.5 Scope of the study
1.6 Limitation of terms
2.0 REVIEW OF RELATED LITERATURE
2.1 Object clause as the power base of corporate entities
2.2 Ultra vires doctrine
2.3 Indoor management rule
2.4 Doctrine of constructive notice
2.5 Consequences of incorporation
2.6 Corporate personality principle
2.7 Limited liability
3.0 RESEARCH DESIGN AND METHODOLOGY
3.1 Sources of data
3.2 Sample used
3.3 Method of investigation
4.0 DATA PRESENTATION AND ANALYSIS
4.1 Data presentation and Analysis
4.2 Test of Hypothesis
5.0 SUMMARY OF FINDING, CONCLUSION AND RECOMMENDATION.
No economy in the world over can exist in isolation of various business activities. These business sectors ranges from sole proprietorship, partnership and public companies. But for the purpose of this research work, we are concentrating on the incorporated companies that is, limited liabilities companies. At this point, what really comes to mind is, what is a company and for what purpose do a company exist and who are those that form a company. These are very important question that is calling for answer
Akubuilo and Okey defined a company as an association of persons who have come together either for the purpose of doing business or otherwise and who are formed under a name with rights and liabilities.
Ignatius Agua define it as an association of a number of persons carrying on business for the purpose of a monetary gain, although, there are other companies that are deliberately non – profit making. The latter are usually formed for social charitable or gives – charitable purpose.
In addition, the next step is to address the next important question on the purpose of the company. This is the objective of a company. Section 39 (1) of CAND stipulate that a company shell not carry on any business not authorized by its memorandum of association and it by its memorandum or the Act. This implies that every company is created or formed for a specific purpose while must be the base of the company. The object clause must be the revolving activities of the company which it must be known and recognized by law.
Finally, something does not just exist without something being done about it, a company do not just come into existence, without people forming the back bone, these people can called the promoter. The companies Acts do not define the world promoters but the expressing promotes according to Akubilo, means who is party to the preparation of the prospectus of the position thereof, but does not include any person by reason of this persons engaged in proceeding the formation of the company simply, a promoter is not an agent, but one who undertakes to form a company with reference to a given project and to set it going, and who takes the necessary steps to accomplish the purpose.
These company must have to be registered in the corporate Affarie commission (CAC) where the name the promoter and the company’s registered office must be.
STATEMENT OF THE PROBLEM
Companies are formed with the aim of making and producing goods and services. But one thing the really comes to mind is to what extent do these companies purse that aims and objectives to attend the apex of the essence this is the objective clause.
The research work want to find, out what really is the objective clause in relation to companies.
Whether, a company can have one or two of multiple objective clauses in the present of its daily activities.
_ The offenses about diverting from the objective.
_ And to find if really the objective clause is the power base of the companies in Nigeria and world over.
PURPOSE OF THE STUDY
Objective clause is like the bed rock of the companies, which is the focus which will find it activities of the company and the employees.
The purpose of this study is to took into the document that are involved in the formation of company at actually the companies fellow strictly on the purpose for which it was initially registered under the corporate Affairs commission. And if there is any deviation what is the effect on the company concern.
SIGNIFICANCE OF STUDY.
The reason for a research work is to assist in the improvement of the thing being research. This research work will not be an exception in that it will be a source of information to promotes as the company’s, that have deviated already in the economy.
The information is this work will be of a vital benefit to the promoter, shareholders as the public at large even the business work in Nigeria.
STATEMENT OF THE HYPOTHESIS
In every research work, these must be a tentative summary or assumption about the topic in discussion.
The research work has the following Hypothesis as a guide to the researcher. The research woke has the following hypothesis in recording the project.
Ho: objective clause is the power base of the company in Nigeria.
Hi: objective clause is not the power base of in Nigeria.
Ho Deviation from the objective clause has not separation from corporate Affaire commission of Nigeria.
Hi Deviation from the objective clause has separation from corporate Affairs commission of Nig.
Therefore, the researcher will use the following hypothesis as a source of his assumption in making suggestion and recommendation to company.
SCOPE OF THE STUDY
The scope of this study is very wide enough that it concern all the companies in the country even beyond the shore of the country. Here the company is incorporated in Nigeria especially, the study is about the company as the researcher will lie to know how it apply strictly the objective clause approved by the (CAC) corporate Affairs commission (CAC).
DEFINITION OF TERMS
In relation to the project, the following terms are to be defined.
__ Memorandum & Association
__ Articles of Association
__ Ultra Vires
__ Objective clause
MEMORANDUM OF ASSOCIATION
This is one of the documents required to be filed for the incorporation of a company. It merits special consideration because of its nature and content. It is together with the articles of association, called the constitution of the company. The memorandum regulates the status and the power of a company and is required to contain vital piece of information about the company.
ARTICLES OF ASSOCIATION
Articles of Association is the documents of the company that regulated investment, capital, profit, risk and control. It determines how the powers conferred on a company in the memorandum shall be exercised. It centers essentially on the management of a company through the agency of the board of Director and the General meeting. It contains such domestic issues as classes of share, alteration of capital meeting, voting seal, provedends, Directors, Audits etc.
The world “ultra – vires” comes into play when a company transact any business which is outside its object. Such transaction will be ultra – vires and void and it can not be validated even by the unanimous approval of all members of such company.
However, ultra – vires could arise from lack of capacity or lack of authority. It could be lack of capacity whereby a company lack the power on its own to act because such transaction is outside the object clause of the company. It could be lack of authority when the office of the company who acts within the object clause of the company.
A company is an association of a number of person carrying on business for the purpose of a monetary gain, although there are other companies that are deliberately non profit making. The latter are usually formed for social charitable or quasi charitable purpose.
A company is looked at from the point of view of profit, gain, business and association. It is also looked at from three areas i.e. as an association of people, for some common objects and for profit or economic purposes.
A promoter was not defined in the former companies Acts, however, the expression promoter means a promoter who is party to the preparation of the prospectus, or of the portion thereof, but does not include any person by reason of his acting in a professional capacity for persons engaged in procuring the formation of the company.
A promoter is not an agent but one who undertakes to form a company with reference to a given project and to set it going, and who takes the necessary steps to accomplish that purpose.
This contains the objectives or purpose for which the company is formed. However, two purpose flows from the object clause, first is that the investor will know the field in which its money is put at risk. Second is that a person dealing with the company will be able to know the extend of the company’s powers. The later purpose is very delicate in the sense that where a company transact any business which is outside its objects the transaction is ultra – vires and void and it can not be validated by the unanimous approval of the members.
The object clause is the most important clause of the memorandum and in most cases, they go hand in hand.
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